Mears Group (MER) H1 2024 earnings summary

Executive summary

• Achieved strong H1 2024 with revenue up 10% to £580.0m and profit before tax up 44% to £30.5m, driven by operational and commercial performance.

• Operating margin (pre-IFRS 16) rose to 5.2% from 4.0%, reflecting operational improvements.

• High customer satisfaction (90%) and improved employee engagement and retention maintained.

• Secured major new contracts, notably North Lanarkshire Council, expected to deliver over £125m annual revenue for at least eight years.

• Board anticipates FY24 revenue of £1.1bn and adjusted profit before tax of £53m–£55m, ahead of market expectations.

Financial highlights

• Revenue rose 10% year-over-year to £580.0m in H1 2024.

• Statutory profit before tax increased 44% to £30.5m; adjusted operating margin improved to 5.2%.

• Statutory diluted EPS up 64% to 23.12p; normalised diluted EPS up 68% to 22.84p.

• Interim dividend per share up 28% to 4.75p.

• EBITDA to cash conversion at 119%; average daily net cash up 16% to £66.4m.

Outlook and guidance

• Revenue for FY24 expected at £1.1bn; adjusted profit before tax guidance £53m–£55m.

• Long-term operating margin target maintained at 5–6%, with short-term margin drag possible from AASC normalisation.

• Board remains cautious on normalisation of Management-led activities but is focused on sustaining margins and mitigating future revenue reductions.

• Focus remains on organic growth, with selective M&A to complement strategy.

• New strategic plan and capital allocation review to be finalised in H2.